All Forum Posts by: Sam Torvinen

Welcome Kelly! I am an investor in Duluth as well. Feel free to connect. Would love to chat RE anytime

@Noah McPherson do you currently own the property or are you trying to close on one that needs repairs?

If you own it, try to figure out a way to tap into your equity via a HELOC or refinance.

If you are trying to close on it, use a construction loan product and follow what @Brandon Plombon is saying. Say the property you want to BRRRR is $100K, rehab at $35K (will need a contractor quote), and closing at $5k so you are all in at $140k. Get an ARV appraisal prior to closing on the loan and the right bank will lend on 75% of the ARV value. Say the ARV appraisal comes at $200k. $200k*0.75 = $150k and you can fully fund the deal without any cash (because your all in cost is $140k). Even if this doesn't fully cover your downpayment (based on purchase price, rehab, and ARV appraisal) you can typically greatly reduce your cash to close on a value add project like this. Shoot me a note for more info!

Hey @Brian Jordan, I live and invest in Duluth. Feel free to shoot me a message to connect. Be happy to answer any questions you might have about the area!

Hey @Jayna Stevens!

I'm a local Duluth investor as well and the market is tough if you are looking on MLS or Zillow/ Realtor. Definitely a limited supply and inflated pricing making a lot of properties that hit the market not cash flowing deals.

However if you are serious about buying there are still deals to be had! Just need to start exploring less conventional methods. I’ve had luck with Craigslist, FB marketplace, direct mail, postcards, and a few others methods. It also helps working with an investor focused agent who knows your criteria for deals that don’t get to the market.

There is a great local group of investors in Duluth that are willing to help and plenty of them are on BP.

Feel free to reach out if you have any questions or think I can offer any value. I always love talking RE!

Welcome to BP and RE investing! 

I am a Duluth resident and investor as well. Duluth has a great network of RE minded individuals willing to help newbies out. 

Feel free to connect if you ever have questions or want to chat any and all things RE. 

PS - both @Brittany Kuschel and @Matt J. I met through BP and are great! 

Love to see an update on this property. The low list price caught my eye as well. Glad to see it rehabbed and worked out! 

Wondering if you were able to leverage the gain in equity from construction to minimize the cash needed to invest in it? Or refinance out? 

(ex: PP $225K + rehab $200K = $425 basis, assume for example ARV appraisal $500K (dependent on NOI & cap rate), lender gives you 75% LTV = $375K, basis $425K - 75% LTV $375 = $50K cash to close? Versus standard $425K @ 20% downpayment = $85K cash to close

Wanted to update where this one turned out. 

Just getting through the refinance and it appraised for $146K. Current construction loan was at $109K so $146K*0.8=$116K which will cover the payoff of construction loan and closing costs. Was able to keep very low equity into this deal! 

The numbers worked out on this but life situation changed my plans and we ended up moving into this house. I was renting a home from my parent's but they moved to Cali and bought a house so are selling. Will be looking to move out after a year or two and keep as a rental.

Currently looking into HELOC's on the equity to build on reserves for this whole COVID crisis and future acquisitions!

@Matt J., check out Listsource.com. Should have the info you are looking for. 

I've had luck contacting county Assessor's too. They can typically pull lists based on criteria and send you an excel format of such for a fee. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Duluth.

Purchase price: $300,000
Cash invested: $25,000

Definitely a unique deal! This property is a fourplex and the only rental my parent's have owned since 2005. They recently moved to California and were looking to offload this property.

What made you interested in investing in this type of deal?

Buy and hold deal. If I could figure out how to finance it they would sell it to me otherwise it was going on the market in the spring.

How did you find this deal and how did you negotiate it?

Negotiated back and forth on sales price. Was able to get price down due to some deferred maintenance on garage and work in units that needed to be done. Ended up at a $270K agreed on sales price with parents, $305K sales price with Gift of Equity, and loan for $255K - see below for Gift of Equity notes.

How did you finance this deal?

Parents wanted $270K but at 25% down, the deal wasn't that great and I couldn't afford to invest $80K for a $1000 per month return (15% COC at $12K/$80K).

Floated the deal to my mortgage originator who recommended a Gift of Equity as long as the property appraised for more than the sale price. Appraisal came in at $305K and parents wrote Gift of Equity letter for the difference ($305K - $270K = $35K).

This turned the $80K down into $25K and the theoretical return from 15% to 48% ($12K/$25K)!

How did you add value to the deal?

Created equity by buying for under market value and getting creative with financing. Improvements planned to update garage to rent out, and update units to improve rents.

What was the outcome?

Closed on the property 1/22 with $25K down. Improvements planned for next spring!

Lessons learned? Challenges?

If you have a deal and aren't certain how you can finance it, reach out to your lender! They can come up with some creative financing options.

Also, if you ask your lender, they can sometimes adjust terms based on what you want to see. I've never had a bank mention being able to use a 15% down on rentals until this property. Also by asking was able to switch the 20 year amortization to 30 years which helps my monthly cash flow!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Kathryn Gunderson at National Bank of Commerce (formerly Republic Bank) - she made this deal happen!

@Kevin Mosier yes the construction loan is good for one year then I have to refinance or sell (within the year). It's looking like rehab will be done within the next couple weeks so will be looking to refinance/ sell this spring! Still weighing between flipping and keeping as rental.  

@Cory Binsfield I learned about it a few months ago but is working out great so far. What I like about this strategy is that if you could find enough deals to make the financials work, you could rinse and repeat indefinitely and scale quickly. I'd love to hear more about your RE journey if you have time to grab a coffee, drink, or just need help with something someday!